Fairfax stock positions

[nwoodman]

57 minutes ago, glider3834 said:

thanks Viking!

+1 @Viking  Great write up, looking forward to your forthcoming book

Edited October 15, 2021 by nwoodman

[Viking]

Fairfax’s most recent brand new equity investment was Foran Mining in August. Fairfax invested C$100 million and received 55.6 million shares (cost of C$1.80) and 16 million warrants (exercisable at C$2.09).

 

Shares popped two days ago and closed today at $2.52. So Fairfax’s position has increased in price by C$45 million.
 

Why? Positive drill results. 

 

Yes, early days. But a positive development with hopefully more to come.  Chug, chug, chug… 
 

Foran Announces 70% Increase in Indicated Resources at McIlvenna Bay

- https://finance.yahoo.com/news/foran-announces-70-increase-indicated-110000525.html

 

VANCOUVER, BC, Oct. 14, 2021 /CNW/ - Foran Mining Corporation (TSXV: FOM) ("Foran" or the "Company") is pleased to announce an updated mineral resource estimate (the "2021 Resource Estimate") for the Company's 100%-owned McIlvenna Bay Deposit ("McIlvenna Bay" or the "Deposit") located in east-central Saskatchewan. The 2021 Resource Estimate outlines significant changes to the resource at McIlvenna Bay compared to the previous resource estimate published in 2019, with over 25,000m of infill and expansion drilling in 36 holes were completed since the prior estimate. To date, the Deposit has been defined by approximately 152,000m of drilling within 285 holes. 

———————-

Fairfax’s investment:

- https://www.newswire.ca/news-releases/foran-mining-announces-completion-of-strategic-c-100-million-private-placement-by-fairfax-893112199.html

 

“The net proceeds of the Financing will be used to rapidly advance the development of the McIlvenna Bay Project and centralized mill for the Hanson Lake District as well as further exploration on the Company's substantial land holdings, enable further investment in key technological and operational research and equipment, and for general corporate purposes.”   

Edited October 15, 2021 by Viking

[MMM20]

On 10/13/2021 at 11:50 AM, Gregmal said:

Have faith….FFH is the next Naspers.

I think this is in reference to my post. So, round numbers, FFH is up 15x on Digit. It now represents ~20-25% of FFH's market cap. Digit is growing like a weed in a huge and rapidly growing market. Dyed in the wool deep value guys like Prem and his loyal followers are notoriously terrible at recognizing this sort of opportunity. Ironic then, isn't it, that nearly 3/4ths of Digit's ownership happens to be embedded in FFH? What if Digit does, in fact, have a better mousetrap and ends up a massive low cost operator in the not-too-distant future? Where might that put the Digit piece vs. the hypothetical FFH stub? Maybe it ends up just a thought exercise but my point was that I don't dismiss the possibility of it playing out that way, especially after Sequoia's investment. And yet FFH trades at an all-time low valuation. Fun. I'll take the gift from Mr. Market and see how it plays out.

Edited October 19, 2021 by MMM20

[matthew2129]

Starting to look like BB may be starting to go parabolic for the 3rd time on heavy volume...what will be the obscure securities reg preventing FFH from monetizing this time around?

[Santayana]

Talk about bad timing on that insider sale last week.  

[Daphne]

Don’t if it would effect BB position sale but FFH is now in pre release quiet period.

[Xerxes]

23 hours ago, MMM20 said:

I think this is in reference to my post. So, round numbers, FFH is up 15x on Digit. It now represents ~20-25% of FFH's market cap. Digit is growing like a weed in a huge and rapidly growing market. Dyed in the wool deep value guys like Prem and his loyal followers are notoriously terrible at recognizing this sort of opportunity. Ironic then, isn't it, that nearly 3/4ths of Digit's ownership happens to be embedded in FFH? What if Digit does, in fact, have a better mousetrap and ends up a massive low cost operator in the not-too-distant future? Where might that put the Digit piece vs. the hypothetical FFH stub? Maybe it ends up just a thought exercise but my point was that I don't dismiss the possibility of it playing out that way, especially after Sequoia's investment. And yet FFH trades at an all-time low valuation. Fun. I'll take the gift from Mr. Market and see how it plays out.

 

I actually like the Naspers analogy and it might apply Atlas as well, if it goes multi-fold from here [big if].

 

[sarcasm starts] What we need now is validation of Digit by Masayoshi Son plunging in by throwing money at it   [sarcasm ends]

[glider3834]

 

On 10/19/2021 at 11:37 AM, MMM20 said:

I think this is in reference to my post. So, round numbers, FFH is up 15x on Digit. It now represents ~20-25% of FFH's market cap. Digit is growing like a weed in a huge and rapidly growing market. Dyed in the wool deep value guys like Prem and his loyal followers are notoriously terrible at recognizing this sort of opportunity. Ironic then, isn't it, that nearly 3/4ths of Digit's ownership happens to be embedded in FFH? What if Digit does, in fact, have a better mousetrap and ends up a massive low cost operator in the not-too-distant future? Where might that put the Digit piece vs. the hypothetical FFH stub? Maybe it ends up just a thought exercise but my point was that I don't dismiss the possibility of it playing out that way, especially after Sequoia's investment. And yet FFH trades at an all-time low valuation. Fun. I'll take the gift from Mr. Market and see how it plays out.

 

Another Fairfax insurtech investment which appears to be off to a good start is Ki insurance - below from Brit's 1H 2021 report 

 

KI: Underwriting traction and continued development In its first six months of trading, Ki, the first algorithmically driven Lloyd’s of London syndicate, has gained excellent traction, with GWP recorded during the period of US$114.2m. It has had a very positive reception from its broking partners since launch, and has transacted with each of its broking partners and in all of its planned classes of business. It has also significantly expanded its market presence by onboarding the reinsurance divisions of its partner brokers. Working closely with its partner brokers, Ki has continued to update and enhance the platform, further streamlining the placement of risks. Enhanced by the launch of version two of its platform, Ki now has over 1,000 active users and is generating approximately 40 quotes per day. Interim Report – 30 June 2021 12 Ki has also developed and released its first broker API. This transformative step will allow partner brokers to integrate digitally with Ki and create a totally seamless connection to Ki’s algorithm to obtain quotes within their own broking platform. This will further accelerate access to Ki’s capacity, providing straight-through processing of data and a fully integrated end-to-end quotation process between market participants at Lloyd’s. We were delighted that Ki won the Digital Insurance Award at the 2021 National Insurance Awards.

 

https://www.artemis.bm/news/blackstone-puts-weight-behind-ki-as-brits-algorithmic-syndicate-raises-500m/

 

 

[glider3834]

article on Eurobank - sorry the English translation is not great 

 

https://www.mononews.gr/trapezes/chrimatistirio-ti-odigise-tin-eurobank-se-ipsila-21-minon

 

Estimates are already circulating in the market for the dividend that Eurobank is going to distribute, which is estimated to be between three and four cents, which, if it happens, justifies a dividend yield of about 4% . The revenue for the dividend that Fairfax should expect, without the 5% tax, should be estimated between 37-49 million euros .

As recorded by foreign reports, such as Morgan Stanley a month ago, Eurobank aims at 2022, and in the first months of next year may have managed to reduce the percentage of red loans from its balance sheet to its levels European average, which provides for 5% .

 

Already after the agreement with DoValue , the NPE's index is expected to fall to just over 7%.

The prospect of a dividend, however, is what fuels investment interest today, as foreign analysts give a target price above 1 euro (1.07 euros according to Morgan Stanley).

[Viking]

I thought it would be interesting to look at the investment portfolio of Fairfax at a very high level. And specifically everything except the bond/cash holdings. So equities, partnerships, derivatives (like the TRS) and real estate. So I am treating the TRS on FFH shares as a stock position of $827 million. Fairfax India is calculated as a $678 million position (shares owned x stock price). All stock prices are based on Oct 19 closing price. Needless to say this is not an exact science with some estimates coming from different sources (2020YE and Q2 reports). Yes, there are errors as I have not spend a great deal of time of digging through what is included in the ‘other’ buckets (like Digit preferred shares?). The goal is to put something together that is generally accurate to help us understand the size and composition of Fairfax’s equity holdings (and I say equity in the broadest of definitions - see below). Please let me know if you see any big mistakes.

 

Estimate of Fairfax’s total investment portfolio = $45 billion

‘Equity Holdings’ defined: equity holdings + partnerships + TRS + real estate = $14.8 billion = 33% of total investments

 

Some Key Take Aways (file is attached below):

1.) Fairfax has a VERY large number of holdings. I actually track 50 different holdings. That does not include the more than 25% of the portfolio that is included in the various ‘other’ and ‘partnerships’ and real estate buckets.

2.) Atlas is the largest single holding at $1.83 billion or 12.4% (of what I broadly define as the ‘equity holdings' bucket)

3.) Total limited partnerships was $2.1 billion (June 30, 2021) or 14.2%. Yes, a much larger position than Atlas.

4.) Emerging market positions = 16% of portfolio. This is large. India is about 2/3 of this total. This is not including Digit preferred shares.

5.) Eurobank is the #2 holding at $1.18 billion = 8.0%. Is Greece considered EM? If so, this would increase Fairfax’s EM weighting to 24%.

6.) Resource positions = 10% of portfolio. Also large.

7.) Blackberry is the #3 holding at $1.17 billion = 7.9% ($11.52 stock price was used; this number moves lots)

8.) FFH Total Return Swaps is the #4 position at $827 million = 5.6%

9.) Fairfax India rounds out the top 5 (#5 position) at $678 million = 4.6% ($13 stock price vs $20 BV

10.) Top 3 individual positions = 28% of total. 72% is invested in something other than Atlas, Eurobank and Blackberry. Not as concentrated as I thought.

11.) 4 of the 5 largest holdings look cheap to crazy cheap to me: Atlas at $14.66; Eurobank at Euro0.90; Fairfax at US$421; Fairfax India at $13. Despite the massive increase in the value of this bucket the past 3 quarters there is lots of upside left. 

Fairfax Equity Holdings Oct 19 2021.xlsx

Edited October 21, 2021 by Viking

[Viking]

1 hour ago, glider3834 said:

article on Eurobank - sorry the English translation is not great 

 

https://www.mononews.gr/trapezes/chrimatistirio-ti-odigise-tin-eurobank-se-ipsila-21-minon

 

Estimates are already circulating in the market for the dividend that Eurobank is going to distribute, which is estimated to be between three and four cents, which, if it happens, justifies a dividend yield of about 4% . The revenue for the dividend that Fairfax should expect, without the 5% tax, should be estimated between 37-49 million euros .

As recorded by foreign reports, such as Morgan Stanley a month ago, Eurobank aims at 2022, and in the first months of next year may have managed to reduce the percentage of red loans from its balance sheet to its levels European average, which provides for 5% .

 

Already after the agreement with DoValue , the NPE's index is expected to fall to just over 7%.

The prospect of a dividend, however, is what fuels investment interest today, as foreign analysts give a target price above 1 euro (1.07 euros according to Morgan Stanley).

Glider, thanks for posting. I noticed the stock was up to Euro0.90 yesterday and was wondering why . I think the rise in property prices in Greece (that is happening everywhere in the world) is really helping Eurobank in two big unexpected ways:

- tailwind to NPE estimates

- tailwind to their profitable and large property business unit (former Grivalia). 
 

Hopefully Eurobank is able to get the dividend re-instated in 2022. That will confirm to investors that they are indeed through the Great Greek Financial Crisis and starting to write the next chapter in their history. A big deal. And should be very profitable for investors for many years to come.

Edited October 21, 2021 by Viking

[nwoodman]

1 hour ago, glider3834 said:

As recorded by foreign reports, such as Morgan Stanley a month ago, Eurobank aims at 2022, and in the first months of next year may have managed to reduce the percentage of red loans from its balance sheet to its levels European average, which provides for 5% .

 

Good stuff Glider.  A couple of attachments

 

1. Eurobank Research MS Eurobank - Focus Shifts to Loan Growth.pdfMS Eurobank.pdf

2. MS Model

3.  A link to a recent MS Podcast featuring Nida Iqbal the MS analyst on Eastern Europe, Middle East, and Africa (EEMEA)

 

https://www.dropbox.com/s/quhxgbbck3oaj2w/MS Greek Bank Podcast.mp3?dl=0

 

Eurobank remains MS only overweight rec for Greece.  Main reason is balance sheet clean up. 

 

2022 is shaping up to be an absolute ripper for Fairfax. Between Atlas and Eurobank alone there could be >$100m of annual dividends heading Fairfax's way.

 

 

Eurobank Model 10-21.xlsm

[glider3834]

1 hour ago, Viking said:

I thought it would be interesting to look at the investment portfolio of Fairfax at a very high level. And specifically everything except the bond/cash holdings. So equities, partnerships, derivatives (like the TRS) and real estate. So I am treating the TRS on FFH shares as a stock position of $827 million. Fairfax India is calculated as a $678 million position (shares owned x stock price). All stock prices are based on Oct 19 closing price. Needless to say this is not an exact science with some estimates coming from different sources (2020YE and Q2 reports). Yes, there are errors as I have not spend a great deal of time of digging through what is included in the ‘other’ buckets (like Digit preferred shares?). The goal is to put something together that is generally accurate to help us understand the size and composition of Fairfax’s equity holdings (and I say equity in the broadest of definitions - see below). Please let me know if you see any big mistakes.

 

Estimate of Fairfax’s total investment portfolio = $45 billion

‘Equity Holdings’ defined: equity holdings + partnerships + TRS + real estate = $14.8 billion = 33% of total investments

 

Some Key Take Aways (file is attached below):

1.) Fairfax has a VERY large number of holdings. I actually track 50 different holdings. That does not include the more than 25% of the portfolio that is included in the various ‘other’ and ‘partnerships’ and real estate buckets.

2.) Atlas is the largest single holding at $1.83 billion or 12.4% (of what I broadly define as the ‘equity holdings' bucket)

3.) Total limited partnerships was $2.1 billion (June 30, 2021) or 14.2%. Yes, a much larger position than Atlas.

4.) Emerging market positions = 16% of portfolio. This is large. India is about 2/3 of this total. This is not including Digit preferred shares.

5.) Eurobank is the #2 holding at $1.18 billion = 8.0%. Is Greece considered EM? If so, this would increase Fairfax’s EM weighting to 24%.

6.) Resource positions = 10% of portfolio. Also large.

7.) Blackberry is the #3 holding at $1.17 billion = 7.9% ($11.52 stock price was used; this number moves lots)

8.) FFH Total Return Swaps is the #4 position at $827 million = 5.6%

9.) Fairfax India rounds out the top 5 (#5 position) at $678 million = 4.6% ($13 stock price vs $20 BV

10.) Top 3 individual positions = 28% of total. 72% is invested in something other than Atlas, Eurobank and Blackberry. Not as concentrated as I thought.

11.) 4 of the 5 largest holdings look cheap to crazy cheap to me: Atlas at $14.66; Eurobank at Euro0.90; Fairfax at US$421; Fairfax India at $13. Despite the massive increase in the value of this bucket the past 3 quarters there is lots of upside left. 

Fairfax Equity Holdings Oct 19 2021.xlsx 149.52 kB · 3 downloads

thanks Viking - on the limited partnerships - AR 2020

 

At December 31, 2020 limited partnerships and other consisted of 51 investments, the three largest being $299.5 (beverage manufacturing), $191.8 (industrials) and $146.4 (oil and gas extraction) 

 

BDT Capital partners do have a $4 bil position in Keurig Dr Pepper, so could this be the mystery beverage manufacturer investment ?  https://www.sec.gov/Archives/edgar/data/1510974/000095012321011542/xslForm13F_X01/0000950123-21-011542-5304.xml

 

The oil & gas extraction business appeared as 3rd largest for the first time in 2020 - opportunistic timing perhaps

 

 

 

 

Edited October 21, 2021 by glider3834

[glider3834]

1 hour ago, Viking said:

I thought it would be interesting to look at the investment portfolio of Fairfax at a very high level. And specifically everything except the bond/cash holdings. So equities, partnerships, derivatives (like the TRS) and real estate. So I am treating the TRS on FFH shares as a stock position of $827 million. Fairfax India is calculated as a $678 million position (shares owned x stock price). All stock prices are based on Oct 19 closing price. Needless to say this is not an exact science with some estimates coming from different sources (2020YE and Q2 reports). Yes, there are errors as I have not spend a great deal of time of digging through what is included in the ‘other’ buckets (like Digit preferred shares?). The goal is to put something together that is generally accurate to help us understand the size and composition of Fairfax’s equity holdings (and I say equity in the broadest of definitions - see below). Please let me know if you see any big mistakes.

 

Estimate of Fairfax’s total investment portfolio = $45 billion

‘Equity Holdings’ defined: equity holdings + partnerships + TRS + real estate = $14.8 billion = 33% of total investments

 

Some Key Take Aways (file is attached below):

1.) Fairfax has a VERY large number of holdings. I actually track 50 different holdings. That does not include the more than 25% of the portfolio that is included in the various ‘other’ and ‘partnerships’ and real estate buckets.

2.) Atlas is the largest single holding at $1.83 billion or 12.4% (of what I broadly define as the ‘equity holdings' bucket)

3.) Total limited partnerships was $2.1 billion (June 30, 2021) or 14.2%. Yes, a much larger position than Atlas.

4.) Emerging market positions = 16% of portfolio. This is large. India is about 2/3 of this total. This is not including Digit preferred shares.

5.) Eurobank is the #2 holding at $1.18 billion = 8.0%. Is Greece considered EM? If so, this would increase Fairfax’s EM weighting to 24%.

6.) Resource positions = 10% of portfolio. Also large.

7.) Blackberry is the #3 holding at $1.17 billion = 7.9% ($11.52 stock price was used; this number moves lots)

8.) FFH Total Return Swaps is the #4 position at $827 million = 5.6%

9.) Fairfax India rounds out the top 5 (#5 position) at $678 million = 4.6% ($13 stock price vs $20 BV

10.) Top 3 individual positions = 28% of total. 72% is invested in something other than Atlas, Eurobank and Blackberry. Not as concentrated as I thought.

11.) 4 of the 5 largest holdings look cheap to crazy cheap to me: Atlas at $14.66; Eurobank at Euro0.90; Fairfax at US$421; Fairfax India at $13. Despite the massive increase in the value of this bucket the past 3 quarters there is lots of upside left. 

Fairfax Equity Holdings Oct 19 2021.xlsx 149.52 kB · 7 downloads

great work too Viking   - will check it out

[glider3834]

1 hour ago, nwoodman said:

 

Good stuff Glider.  A couple of attachments

 

1. Eurobank Research MS Eurobank - Focus Shifts to Loan Growth.pdfMS Eurobank.pdf

2. MS Model

3.  A link to a recent MS Podcast featuring Nida Iqbal the MS analyst on Eastern Europe, Middle East, and Africa (EEMEA)

 

https://www.dropbox.com/s/quhxgbbck3oaj2w/MS Greek Bank Podcast.mp3?dl=0

 

Eurobank remains MS only overweight rec for Greece.  Main reason is balance sheet clean up. 

 

2022 is shaping up to be an absolute ripper for Fairfax. Between Atlas and Eurobank alone there could be >$100m of annual dividends heading Fairfax's way.

 

 

Eurobank Model 10-21.xlsm 4.49 MB · 2 downloads

great podcast thanks nwoodman 

[petec]

1 hour ago, glider3834 said:

thanks Viking - on the limited partnerships - AR 2020

 

At December 31, 2020 limited partnerships and other consisted of 51 investments, the three largest being $299.5 (beverage manufacturing), $191.8 (industrials) and $146.4 (oil and gas extraction) 

 

BDT Capital partners do have a $4 bil position in Keurig Dr Pepper, so could this be the mystery beverage manufacturer investment ?  https://www.sec.gov/Archives/edgar/data/1510974/000095012321011542/xslForm13F_X01/0000950123-21-011542-5304.xml

 

The oil & gas extraction business appeared as 3rd largest for the first time in 2020 - opportunistic timing perhaps

 

 

 

 

 

I haven't checked the AR so these might be dumb comments, but:

- Might beverage be the Sokol JV? Can't remember the name nor, when it was sold.

- And wouldn't oil & gas be Exco post bk? I'm not aware of another big oil and gas investment unless its a collection of Ensign, H&P, and others?

 

Another one we have not heard about in ages is Quantum, which was meant to be India's Vanguard but doesn't seem to have made much progress. 

[glider3834]

1 hour ago, petec said:

 

I haven't checked the AR so these might be dumb comments, but:

- Might beverage be the Sokol JV? Can't remember the name nor, when it was sold.

- And wouldn't oil & gas be Exco post bk? I'm not aware of another big oil and gas investment unless its a collection of Ensign, H&P, and others?

 

Another one we have not heard about in ages is Quantum, which was meant to be India's Vanguard but doesn't seem to have made much progress. 

no worries

different - Davos brands was sold in 2020

Exco an equity accounted associate & has different carrying value - this oil & gas business (one business not a collection) sits under limited partnerships so sits under 'Common Stocks' that are MTM on Balance sheet

 

Looks like Quantum are managing around 3bil USD & HWIC (Fairfax) own around 49% https://www.quantumamc.com/about-us/our-sponsor/95 - I had a quick look at SEBI to confirm but got lost & now my partner is calling me for dinner  

 

[StubbleJumper]

@Viking Thank-you for investing the time to meticulously quantify those holdings.  Followers of FFH knew the rough importance of each, but such a systematic coverage is an excellent resource for all of us.

 

Sometimes when I see a list, my mind jumps to what is not on the list.  In this case, your size-ranked list made me think a bit about where the Toys R Us holding would fit if it were publicly traded.  Recently, FFH astutely unloaded the operational element of Toys, but retained the real estate (I say "astutely" because I am guessing that Toys is getting its ass handed to it by Amazon...).  When FFH bought Toys for CAD$300m in 2018, the story was that the real estate alone was worth the purchase price, and now FFH has effective severed the real estate from the operations.  So, given that real estate prices in Canada have gone absolutely bonkers over the past three years, what are those properties worth today?  Has big-box real estate tracked the insanity of the residential real estate market?  Is it possible that those real estate holdings are worth something similar to FFH's holding in Recipe (ie, US$336m) today?   If anyone has any insight on the value of big-box sites, I'd love to read it.

 

Thanks again for the excellent work.

 

 

SJ

[Viking]

9 hours ago, nwoodman said:

 

Good stuff Glider.  A couple of attachments

 

1. Eurobank Research MS Eurobank - Focus Shifts to Loan Growth.pdfMS Eurobank.pdf

2. MS Model

3.  A link to a recent MS Podcast featuring Nida Iqbal the MS analyst on Eastern Europe, Middle East, and Africa (EEMEA)

 

https://www.dropbox.com/s/quhxgbbck3oaj2w/MS Greek Bank Podcast.mp3?dl=0

 

Eurobank remains MS only overweight rec for Greece.  Main reason is balance sheet clean up. 

 

2022 is shaping up to be an absolute ripper for Fairfax. Between Atlas and Eurobank alone there could be >$100m of annual dividends heading Fairfax's way.

 

 

Eurobank Model 10-21.xlsm 4.49 MB · 6 downloads

@nwoodman thanks for all the info. Learned lots (hate that when it happens  ). The Greek economy looks like it is turning the corner with 8% growth in 2021 and 4% predicted for 2022. Lots of tailwinds for Eurobank. 

[Xerxes]

1 hour ago, StubbleJumper said:

@Viking Thank-you for investing the time to meticulously quantify those holdings.  Followers of FFH knew the rough importance of each, but such a systematic coverage is an excellent resource for all of us.

 

Sometimes when I see a list, my mind jumps to what is not on the list.  In this case, your size-ranked list made me think a bit about where the Toys R Us holding would fit if it were publicly traded.  Recently, FFH astutely unloaded the operational element of Toys, but retained the real estate (I say "astutely" because I am guessing that Toys is getting its ass handed to it by Amazon...).  When FFH bought Toys for CAD$300m in 2018, the story was that the real estate alone was worth the purchase price, and now FFH has effective severed the real estate from the operations.  So, given that real estate prices in Canada have gone absolutely bonkers over the past three years, what are those properties worth today?  Has big-box real estate tracked the insanity of the residential real estate market?  Is it possible that those real estate holdings are worth something similar to FFH's holding in Recipe (ie, US$336m) today?   If anyone has any insight on the value of big-box sites, I'd love to read it.

 

Thanks again for the excellent work.

 

 

SJ

 

I do not have any comments on the real-estate, but if memory serves, Amazon obliterated Toy' R Us side that is based in the U.S. The Canadian operation was profitable, but was being used by the parent U.S.-based Toy' R Us to subsidies its losses in the U.S. So, when FFH bought the Canadian side of the business, they bought a profitable business.

 

 

 

[StubbleJumper]

1 minute ago, Xerxes said:

 

I do not have any comments on the real-estate, but if memory serves, Amazon obliterated Toy' R Us side that is based in the U.S. The Canadian operation was profitable, but was being used by the parent U.S.-based Toy' R Us to subsidies its losses in the U.S. So, when FFH bought the Canadian side of the business, they bought a profitable business.

 

 

 

 

Yes, I'd say that Canada has been a couple of years behind the US in adopting Amazon as a preferred retailer.  My anecdotal observation is that the number of empty Amazon boxes at the curb on recycling day and the number of white mini-vans prowling through my neighbourhood have sky-rocketed over the past few years.  The pandemic likely hasn't helped matters either, as Toys would likely have been designated as a "non-essential" retailer in Canada's largest province and therefore could only offer curbside pickup.  If you have to order something for curbside pickup, you're better off just ordering it from Amazon and getting home delivery.

 

All of that to say that I suspect that Toys' retail business hasn't gone well since FFH purchased it in 2018.  I was very happy to see FFH sever the real estate from the actual business because then it will not be FFH which needs to make the agonizing decision of whether to close shop if (when?) the retail ops can no longer generate positive cash from ops.  Instead, that will be Putnam's decision and, as long as they pay the rent, FFH is golden.  And if they can't pay the rent, that's a minor speedbump on the road to ultimately divesting the real estate (hopefully at a large profit!).

 

When FFH bought Toys, I groaned out loud because it looked to me like a reprise of Eddie Lampert's Sears purchase.  In principle the assets are worth more than the purchase price, but that kind of investment only works if you don't lose a bunch of money from ops before you are able to divest the valuable assets.  That doesn't look to be a risk anymore. 

 

 

SJ

[petec]

Viking, doesn’t Fairfax own more of Atlas than 37%? I thought it was nearer 50%. 

[Viking]

1 hour ago, petec said:

Viking, doesn’t Fairfax own more of Atlas than 37%? I thought it was nearer 50%. 

@petec, i made the mistake of adjusting all my spreadsheets to reflect what Fairfax reported in the 2020AR. The issue is their stated ownership stakes in their equity holdings excluded the Riverstone positions. So i am slowly reverting back to ownership numbers that include Riverstone positions (for all holdings). So for Atlas i am using share count from the most recent 13F. The 37% is from the 2020AR (and is understated); i think Fairfax ownership of Atlas is the low 40% range. I will update Atlas after both companies report Q3 results when we should get updated information. Some of the debentures may have been converted to stock as well. Bottom line, given its size, i will be updating the Atlas numbers (% ownership and shares owned). 

[glider3834]

5 hours ago, StubbleJumper said:

 

Yes, I'd say that Canada has been a couple of years behind the US in adopting Amazon as a preferred retailer.  My anecdotal observation is that the number of empty Amazon boxes at the curb on recycling day and the number of white mini-vans prowling through my neighbourhood have sky-rocketed over the past few years.  The pandemic likely hasn't helped matters either, as Toys would likely have been designated as a "non-essential" retailer in Canada's largest province and therefore could only offer curbside pickup.  If you have to order something for curbside pickup, you're better off just ordering it from Amazon and getting home delivery.

 

All of that to say that I suspect that Toys' retail business hasn't gone well since FFH purchased it in 2018.  I was very happy to see FFH sever the real estate from the actual business because then it will not be FFH which needs to make the agonizing decision of whether to close shop if (when?) the retail ops can no longer generate positive cash from ops.  Instead, that will be Putnam's decision and, as long as they pay the rent, FFH is golden.  And if they can't pay the rent, that's a minor speedbump on the road to ultimately divesting the real estate (hopefully at a large profit!).

 

When FFH bought Toys, I groaned out loud because it looked to me like a reprise of Eddie Lampert's Sears purchase.  In principle the assets are worth more than the purchase price, but that kind of investment only works if you don't lose a bunch of money from ops before you are able to divest the valuable assets.  That doesn't look to be a risk anymore. 

 

 

SJ

Yep I remember investing in Sears years ago following that same train of thought & it was that big red CFO number that kept repeating itself that ultimately caused me to exit.

 

Its interesting Fairfax has a a lot of real estate indirectly owned via Common Stock holdings whose primary business is not real estate investment - just three that come to mind

 

- via Eurobank equity holding - (ex Grivalia) real estate portfolio has asset value of €1.4 bil (FFH 31% share worth approx $504 mil)

-via Stelco (FFH 15% share $37 mil??)  - Stelco also is preparing to sell a parcel of land adjacent to its operations in Hamilton, Ontario that could be worth $250 million.https://www.barrons.com/articles/canadian-steelmaker-stelco-is-a-low-cost-producer-and-has-an-investor-friendly-ceo-how-that-could-boost-the-stock-51633365262

- via BIAL (via Fairfax India 54% ownership of BIAL) - 460 acres - (FFH stake assuming Riverstone buyback 460 x 54% x 36.6% = 90 acres - value???) 

Real Estate Monetization: BIAL has approximately 460 acres of land adjoining the airport that can be developed. Most of this land is undeveloped and Bangalore’s historical population areas are getting congested, so the city is expanding in the airport’s direction. BIAL anticipates significant upside, over time, from monetization of this real estate. We provide below an update on the significant progress made in the actions to monetize the land available for development. • A 100% owned special purpose vehicle (SPV) subsidiary of BIAL was incorporated to carry on the real estate activities of BIAL. This entity, Bangalore Airport City Limited (BACL), is now capitalized and staffed and is expected to be self-funding as we move forward. Plans to develop the first 176 acres of land have 9 FAIRFAX INDIA HOLDINGS CORPORATION been advanced and several deals are being negotiated. Infrastructure planning and detailed design for this parcel have been completed. • Anchored on the principles of a smart city, BACL will focus on four asset classes – business parks; a retail, dining and entertainment village (RDE); hospitality; and convention and exhibition centres. • Despite potential partners’ and investors’ inability to visit the site because of the pandemic, significant progress has been made in project plans. • A land lease for a 3D printing facility has been completed and the first payment received. • A land lease for a large central kitchen for the premier airline services company has been agreed, although payment has been delayed because of pandemic related disruptions. • A term sheet has been signed for a joint development ‘‘built to suit’’ campus for a multinational corporation. • A term sheet has been signed for a joint development trade centre.

Edited October 21, 2021 by glider3834

[petec]

1 hour ago, Viking said:

@petec, i made the mistake of adjusting all my spreadsheets to reflect what Fairfax reported in the 2020AR. The issue is their stated ownership stakes in their equity holdings excluded the Riverstone positions. So i am slowly reverting back to ownership numbers that include Riverstone positions (for all holdings). So for Atlas i am using share count from the most recent 13F. The 37% is from the 2020AR (and is understated); i think Fairfax ownership of Atlas is the low 40% range. I will update Atlas after both companies report Q3 results when we should get updated information. Some of the debentures may have been converted to stock as well. Bottom line, given its size, i will be updating the Atlas numbers (% ownership and shares owned). 

Noted, thanks.